I refer to Wong Sulong's article in The Star which carried the title, ' Double Tracking: It all boils down to price '.
I share Wong's view that we should go for the bid that offer the lowest price. However, we should not overlook a number of inconsistencies in the bidding process of the railway double-tracking project .
1) Did the MMC-Gamuda's eight-page proposal offer the lowest quotation as at Oct 20, 2003?
On Nov, 5, Deputy Transport Minister Douglas Unggah's formal reply to parliament admitted that the MMC-Gamuda proposal contained clauses of variation order (or statement of need) as compare to the comprehensive Ircon proposal which covered every minute details with no further need of variation order.
Taking into an account of 30 percent extra claims on the variation order, the MMC-Gamuda's project cost could go up to RM18.8 billion compared to the current price of RM14.48 billion.
The Rawang-Ipoh 179km central grid double-tracking project, awarded to DRB-Hicom and Emrail Sdn Bhd, initially was priced at RM14 million per kilometer, but this had swollen to RM26.4 per km, as revealed by the Deputy Transport Minister Ramli Ngah Talib in Dewan Rakyat on Nov 5. This amounted to an increase of 86 percent!
The Gamuda-MMC proposal to the government must show the actual variation order if it is to prove that it is indeed the lowest offer. The lowest price for the double track project is not determined by the lowest proposed price offered without seriously evaluating the hidden cost in the variation order.
2) Future of Malaysian palm oil market affected
On Nov 5, Ramli Ngah Talib revealed the mode payment for the double-tracking project shall be financed by loans and government allocation as compared to the initial barter trade arrangement which involved confirmed order of 8 million MT (metric tonnes) of crude palm oil (CPO) from India and China.
Will MMC-Gamuda willing to take up the 8.0 million metric tonnes of palm oil for the project offered?
The awarding of the contract to a local company also affects the future of Malaysian palm oil market and the long-term relationship with our biggest trading partner in Asia Pacific and South Asia.
This hasty decision will cost Malaysia about RM80 billion (about 22 percent of Malaysia's total export) of annual bilateral trade and thousand of new job opportunities.
It is time for the government to ponder the implications of such a decision which will have direct, and indirect impact, on the Malaysian economy.
3) Why did the foreign companies offered a higher price?
We do not know exactly why Indian Railway Construction Company (Ircon) and China Railway Engineering Corp (CREC) offered such a high price tag of RM42 billion in its initial offer and then reduced it to RM24 billion.
Could the quotation also include the taking care of interests of certain groups of people?
This question arose when Indian Express daily reported that former transport minister Dr Ling Liong Sik wrote to Indian Prime Minister AB Vijpayee on Dec 5, 2001 to request for the extension of the services of Arun Prasad, the managing director of Ircon. In Ling's letter, he said:
"The Ipoh-Padang Besar rail project will be one of the largest infrastructure projects to be implemented in Malaysia. It is essential to have a person thoroughly familiar with the Malaysian system, law, practices and culture here. In fact one of the major consideration of this negotiated award has been the strong involvement of Arun Prasad and his awareness of local conditions. Unfortunately, it has come to our notice that he would complete his term and be due for retirement in Jan 31, 2002. In view of the importance of this project, we would like to suggest that there will be no abrupt change of key personnel for the benefit of both parties."
Prasad and six top Ircon executives were then investigated by the Central Vigilance Commission and were held for disciplinary actions.
Among the issues involved was the award of the consultancy services to a Malaysian consultancy company at the rate of 8-9 percent whereas the reasonable rate is about 4-4.5 percent.
Why should a Malaysia consultancy company be given such high professional fees?
Our new prime minister should have the accountability and moral obligation to conduct a thorough investigation on the matter and explain it to the people.
4) Privatisation of KTMB by Gamuda-MMC
Other than the RM14.48 billion project, MMC-Gamuda also proposed to acquired KTMB through the privatisation as part of the package. This was announced by the Gamuda managing director in his recent press interview.
The takeover of KTMB is also the acquisition of the huge fortune of the KTMB land bank (which include the KTMB land in Singapore).
The Malaysian government in its Eighth Malaysia Plan had invested billions of ringgit in KTMB. Since 1988, Ircon alone has been awarded RM1.39 billion worth of jobs in KTMB.
In this matter, MMC-Gamuda is also eyeing into the assets of KTMB and exploit the multi-billion government investment in railway development for free.
5) Has the Malaysian government been consistent with its policy of taking the lowest bid offered?
If the lowest offer is the major consideration, why didn't the government issue the Letter of Intent to Ircon and CREC without prior decision on the final price?
Why did the government not practise an open international tender to ensure all qualified bidders participated in this project? The government will certainly get the best offer had it done so.
It is the desire of all Malaysians to see the government get the best deal from this double-tracking project. However, MMC-Gamuda did not offer the best package to Malaysia.
On the surface, their proposal is very attractive, but if we consider other elements of the total cost of ownership and the hidden variation order and KTMB privatisation, the end loser will be the Malaysian people.
Though the letter of intent (LOI) is not a legal binding document, I do not agree with the manner the Malaysia government has handled the issue. We also need to question about the legality of the letter of award (LOA) issued to the MMC-Gamuda consortium.
The LOA issued did not comply with the basic contractual law because the MMC-Gamuda offer failed to offer minor details of the project. The best example that we can compare is the acceptance of the construction of a house at RM14.48 billion without clearly stating the details of construction job involved and the material used?
Acceptance of the open-ended statement of need in the MMC-Gamuda proposal is highly irregular and questionable. All risks of the cost over-run will be eventually transferred to government; thus it is not a fair deal that government should accept.
On the other hand, we also have to seriously study the validity of the letter of award if there are any irregularities of the governmental procedures towards the issuance of this document.
It is very important that the prime minister make public the terms and conditions the proposal of MMC-Gamuda to proof the sincerity of the new administration in fulfilling its renewed slogan of ( Bersih, Cekap dan Amanah ) without fears or favours.
